I thought it would be a fun exercise to have a dig through Naspers' publicly available reports and financials to see if I could arrive at a valuation for Souq given their recent mega $275m funding announcement, which if word on the street is to be believed, is a cumulative of funds that have been raised since mid-2015 or so.

I dug back through to Nasper's first investment in Souq that took place in October 2012 and ended at the last available information as of September 2015.

Here are a few highlights:

Souq's implied post money valuation as of Nasper's last investment in May 2015 was $866,918,578.44.

Nasper's has invested a total of $163,941,048.34 to date.

Souq's valuation has jumped 601% from October 2012 through to May 2015.

And a few charts:

The change in Souq's valuation over time

The change in how much Naspers has invested over time

And here's what you're really after:

Notes:

The South African Rand (Naspers' base currency) has had a wild ride and its fluctuation has an impact on the USD valuation. For example ZAR / USD was 9.94 on 15th May 2015 but jumped to 12.43 by the 15th of July 2015. That has a material impact on the USD value of the ZAR 802m dilution gain, which in turn has a material impact on the valuation. I've taken the 15th May 2015 number to keep it consistent with the rest of the analysis. The inferior exchange rate actually drives the latest valuation down to under $700m, which is unlikely.

I also found it interesting that Naspers' latest investment was significantly lower than its previous investments, which generally have increased per round over time. The June 2013 round is a bit of an anomaly, but is not significantly lower than the October 2012 round. While I can only speculate, if I take this together with them stating that they decided not to participate in the the July 2015 round, it points towards a change in sentiment towards the investment. Note that the VC space in the Valley was starting to voice concerns about valuations towards this time. I can't see an investor having invested in excess of $160m allowing themselves to be diluted if everything were bright and rosy. In the same note Naspers' indicated that they decided not to participate in Flipkart's rounds in April 2015 and July 2015, again allowing themselves to be diluted to 14.95%, while taking a nice dilution gain.

Unfortunately it'll be a while before we see more data from Naspers. Their FY ends on 31st March 2016, but they don't report until well into the summer. It's very likely that the additional investment from Standard Chartered (I heard $50m), IFC ($27m) and Baillie Gifford has pushed Souq's valuation to above $1 billion turning it into the region's first unicorn (with rainbows).

When we started JadoPado in September 2010, the technology space in the region was virtually non-existent, save a few valiant efforts. Today, we have startup accelerator upon accelerator and a plethora of service providers looking to get a piece of the action. Every free zone operator worth their salt has thrown their hat in the ring to sign up entrepreneurs and their budding ventures.

The funding climate has improved significantly, driven by accelerators and seed funds. Where previously it was next to impossible to get any sort of funding unless you'd spent a decade or more networking in the space, seed funding is now relatively easily available, with a wide variety of investors willing to write small cheques.

The challenge, however, is if you are looking to scale up and bring on anything more than $5 million into your business. While to other industries this may seem like a significant amount of money - and it is - the very definition of a technology startup as a vehicle to grow quickly to capitalise on an opportunity requires large amounts of capital to create and maintain forward momentum.

Unfortunately, not only are the options limited, but they remain near impossible to find. Institutional investors, private equity houses and family offices in the region have found it difficult to make direct investments in technology due to the inherent non-physical nature of the product. It's difficult to assess quality and performance if you're unable to see, touch and feel the outcome. It remains a skill that regional investors are yet to acquire.

The poor regional funding climate has resulted in the largest e-commerce players in the GCC all being owned overwhelmingly by investors from outside of the region.

Souq emerged from the sale of Maktoob to Yahoo! and continues to lead the e-commerce march. An obvious play for some of the region's powerhouse franchise retailers, New York-based Tiger Global is a significant investor, along with Naspers, a Johannesburg listed South African media conglomerate, who controls 47.6% of Souq as of their last funding round in March 2014. If the rumour mill is to be believed, a new round valuing Souq at $1 billion will push Naspers into majority ownership of the region's largest e-commerce player.

Namshi, an online fashion retailing business, was founded and funded by Berlin-based Rocket Internet. Other top tier European investors soon joined the fray. With an impressive team and relentless execution, Namshi has quickly turned itself into the region's leading fashion experience and is expected to cross $100 million in revenues this year.

MarkaVIP, whose investors include emerging venture capitalists in Europe such as Hummingbird Ventures and Lumia Capital in the United States, more recently attracted Abdul Latif Jameel, a leading Saudi-based conglomerate, to invest a reported $30 million, making it the first time a regional investor has directly invested significant capital into a regional e-commerce opportunity. However, MarkaVIP remains the exception rather than the rule.

Why should the value of GCC consumers and their spending accrue to New York, Johannesburg and Berlin? Inward foreign investment isn't something that I oppose, but I do think it is an incredible shame that as a region we have been unable to replicate our tremendous success in physical retail in the online space, nor are we making enough serious attempts to do so.

Recently, Alpen Capital (PDF) reported that while GCC retail will be an astronomical $285 billion by 2018, only 15% of retailers have an e-commerce presence. If you re-define that presence as best in class, outstanding e-commerce experiences, I'd argue that it is well below 3% of retailers in the region.

This year, e-commerce is expected to be a $7 billion opportunity in the GCC. Over the next 7 to 10 years, e-commerce should conservatively make up between 8% to 10% of retail, resulting in a market opportunity of at least $24 billion to $30 billion.

The challenge for regional retailers is that e-commerce is a globally disruptive force. As transit times decrease and customs barriers reduce, consumers are increasingly shopping around the world from whoever they want to wherever they want. Your store at the mall is suddenly competing with every single retailer on the planet, not just the guy next door.

It's the calm before the storm. We're fast approaching an inflection point before we see significant growth in e-commerce and the birth of new businesses and the opportunity for incumbents to re-define existing ones.

I am hopeful that investors and retailers in the region rise up to the challenges and opportunities that tomorrow will bring.

"In July 2013 the group acquired an additional interest of 28,6% in Dubizzle, an online classifieds platform centred on Dubai. The group's total interest in Dubizzle increased to 53,6% and the group now accounts for Dubizzle as a subsidiary. The fair value of the total purchase consideration was R939m, consisting of R477m in cash for the additional interest and R462m being the acquisition date fair value of the existing interest held in Dubizzle”

At today’s values (1 ZAR to 0.093 USD) , that values Dubizzle at a total of ZAR 1.752 billion, which is the equivalent of USD 162 million.

"In June 2013 the group acquired an additional 6,1% interest in Souq Group Limited, an online retailer, marketplace and payment platform business, with operations in the UAE, Saudi Arabia, Egypt and Kuwait, for R296m in cash. During March 2014 the group acquired a further interest of 11,8% in Souq Group Limited for R911m in cash. The group now has a 47,6% interest in Souq Group Limited”

As of the last round of funding, Naspers is valuing Souq and its subsidiaries at ZAR 7.720 billion, which equates to USD 717 million at today’s values.

It’s rumoured that Souq’s revenue line is in the USD 300 million range, which would give it a 2.39x revenue multiple.

Extracting from Naspers’ presentation deck, their total reported e-commerce revenue for e-commerce e-tail (i.e. not classifieds and other forms) was ZAR 10.705 billion (USD 994 million) of which 11% came from Middle East & Africa.

Assuming that Souq is Naspers’ only major investment in the region, and using their method of equity accounting, their share (47.6%) of Souq’s revenue is equivalent to ZAR 1.178 billion (USD 109 million), which would result in total revenues at Souq of USD 229 million.

In terms of Naspers’ recent investment, that equates to a 3.13xrevenue multiple, which feels like a fair multiple given the region’s context, but doesn’t even come close to what we typically hear of from Silicon Valley.

In June 2013 Naspers invested an amount of ZAR 296 million to acquire an additional stake of 6.1% in Souq, to bring their total interest to 35. 8%.

At this point, Naspers valued Souq at ZAR 4.852 billion, the equivalent of USD 450 million at today’s values (note that ZAR depreciated by 14% from March 2013 through to March 2014, creating an additional positive impact for Naspers).

Extracting from the deck, their total reported e-commerce revenue for e-commerce e-tail as of September 2013 was ZAR 6.651 billion (USD 616 million) of which 3% came from Middle East & Africa.

Again, assuming that Souq is Naspers’ only major investment in the region, their share (35.8%) of Souq’s revenue is equivalent to ZAR 199.53 million (USD 18.47 million), which would result in 1H 2014 revenues at Souq of USD 51.52 million.

In terms of Naspers’ June 2013 investment, that equates to a 2.29x revenue multiple, if you extrapolate Souq’s 1H 2014 results in a straight line. Given that it looks like revenue has accelerated considerably from September 2013 through to March 2014, it is likely that the revenue multiple was closer to the recent multiple of 3.13x.

As a final piece of icing, in terms of our wider regional context:

"During May 2014 the group invested a further R543m in cash in Flipkart. The group now has a 17,7% interest in Flipkart on a fully diluted basis"

It looks like the additional 1% acquisition in Flipkart took place at a USD 5 billion valuation.

Lots of food for thought for regional investors trying to figure out whether the e-commerce train is worth jumping on.